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Managing in a
Global Environment
Managing in a
Global Environment
6-2
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning Objectives
Learning Objectives
Explain why the ability to perceive, interpret,
and respond appropriately to the
organizational environment is crucial for
managerial success
Identify the main forces in a global
organizations task and general
environments, and describe the challenges
that each force presents to managers
McGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc. All rights reserved.
6-3
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning Objectives
Learning Objectives
Explain why the global environment is
becoming more open and competitive
and why barriers to the global transfer
of goods and services are falling,
increasing the opportunities,
complexities, challenges, and threats
that managers face
6-4
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Global Organizations
Global Organizations
Organizations that operate and compete
not only domestically, but also globally
Uncertain and
unpredictable
6-5
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Organizational Environment
Organizational Environment
Set of forces and conditions outside the
organizations boundaries that have the
potential to affect the way the
organization operates
Opportunities and threats
6-6
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Task Environment
Task Environment
Set of forces and conditions that
originate with suppliers, distributors,
customers, and competitors
Affect an organizations ability to obtain
inputs and dispose of its outputs
Most immediate and direct effect on
managers
6-7
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Forces in the Organizational
Environment
Forces in the Organizational
Environment
Figure 6.1
6-8
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The Task Environment
The Task Environment
Suppliers
Individuals and organizations that provide an
organization with the input resources that it needs
to produce goods and services
Raw materials, component parts, labor (employees)
Relationships with suppliers can be difficult due to
materials shortages, unions, and lack of
substitutes.
Suppliers that are the sole source of a critical item are in a
strong bargaining position to raise their prices.
Managers can reduce these supplier effects by
increasing the number of suppliers of an input.
6-9
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Global Outsourcing
Global Outsourcing
Purchase of inputs from foreign suppliers
or the production of inputs abroad to
lower production
costs and improve
product quality and
design
6-10
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The Task Environment
The Task Environment
Distributors
Organizations that help other organizations
sell their goods or services to customers
Powerful distributors can limit access to markets
through its control of customers in those
markets.
Managers can counter the effects of distributors
by seeking alternative distribution channels.
6-11
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The Task Environment
The Task Environment
Customers
Individuals and groups that buy goods and
services that an organization produces
Identifying an organizations main customers
and producing the goods and services they want
is crucial to organizational and managerial
success.
6-12
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The Task Environment
The Task Environment
Competitors
Organizations that produce goods and services
that are similar to a particular organizations goods
and services
Potential Competitors
Organizations that presently are not in the task
environment but could enter if they so chose
Strong competitive rivalry results in price
competition, and falling prices reduce access to
resources and lower profits.
6-13
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The Task Environment
The Task Environment
Rivalry between competitors is potentially
the most threatening force that
managers deal with
Vs.
Vs.
6-14
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The Task Environment
The Task Environment
Barriers to Entry
Factors that make it difficult and costly for
the organization to enter a particular task
environment or industry
6-15
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Barriers to Entry
Barriers to Entry
Economies of scale
Cost advantages associated with large
operations
Brand loyalty
Customers preference for the products of
organizations currently existing in the task
environment.
Government regulations that impede
entry
6-16
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Barriers to Entry and Competition
Barriers to Entry and Competition
Figure 6.2
6-17
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General Environment
General Environment
Economic
Technological
Socio-cultural
Demographic Political and Legal
Forces
6-18
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The General Environment
The General Environment
Economic Forces
Interest rates, inflation, unemployment,
economic growth, and other factors that
affect the general health and well-being of
a nation or the regional economy of an
organization
Managers usually cannot impact or control
these.
Forces have profound impact on the firm.
6-19
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The General Environment
The General Environment
Technological Forces
Outcomes of changes in the technology
that managers use to design, produce, or
distribute goods and services
Results in new opportunities or threats to
managers
Often makes products obsolete very
quickly.
Can change how managers manage.
6-20
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
The General Environment
The General Environment
Sociocultural Forces
Pressures emanating from the social structure of a
country or society or from the national culture
Social structure: the arrangement of relationships between
individuals and groups in society
National culture: the set of values that a society considers
important and the norms of behavior that are approved or
sanctioned in that society.
Cultures and their associated social structures,
values, and norms differ widely throughout the
world.
6-21
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The General Environment
The General Environment
Demographic Forces
Outcomes of change in, or changing attitudes
toward, the characteristics of a population, such as
age, gender, ethnic origin, race, sexual orientation,
and social class
During the past two decades, women have entered the
workforce in increasing numbers and most industrial
countries populations are aging.
This will change the opportunities for firms competing in
these areas as demands for child care and health care are
forecast to increase dramatically.
6-22
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The General Environment
The General Environment
Political and Legal Forces
Outcomes of changes in laws and
regulations, such as the deregulation of
industries, the privatization of
organizations, and increased emphasis on
environmental protection
Increases in laws and regulations increase the
costs of resources and limit the uses of
resources that managers are responsible for
acquiring and using effectively and efficiently.
6-23
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
The General Environment
The General Environment
Global Forces
Outcomes of changes in international
relationships; changes in nations economic,
political, and legal systems; and changes in
technology, such as falling trade barriers, the
growth of representative democracies, and reliable
and instantaneous communication
Important opportunities and threats to managers:
The economic integration of countries through free-trade
agreements (GATT, NAFTA, EU) that decrease the
barriers to trade.
6-24
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The Global Environment
The Global Environment
Figure 6.3
6-25
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Declining Barriers to Trade and
Investment
Declining Barriers to Trade and
Investment
Tariff
A tax that government imposes on imported
or, occasionally, exported goods.
Intended to protect domestic industry and jobs
from foreign competition
Other countries usually retaliate their own tariffs,
actions that eventually reduce the overall
amount of trade and impedes economic growth.
6-26
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GATT and the Rise of Free Trade
GATT and the Rise of Free Trade
Free-Trade Doctrine
The idea that if each country specializes in
the production of the goods and services
that it can produce most efficiently, this will
make the best use of global resources
If India is more efficient in making textiles, and
the United States is more efficient in making
computer software, then each country should
focus on their respective strengths and trade for
the others goods.
6-27
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Declining Barriers of Distance and
Culture
Declining Barriers of Distance and
Culture
Distance
Markets were essentially closed because of the
slowness of communications over long distances.
Culture
Language barriers and cultural practices made
managing overseas businesses difficult
Changes in Distance and Communication
Improvement in transportation technology and fast,
secure communications have greatly reduced the
barriers of physical and cultural distances.
6-28
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Effects of Free Trade on Managers
Effects of Free Trade on Managers
Declining Trade Barriers
Opened enormous opportunities for
managers to expand the market for their
goods and services.
Allowed managers to now both buy and sell
goods and services globally.
Increased intensity of global competition
such that managers now have a more
dynamic and exciting job of managing.
6-29
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Effects of Free Trade on Managers
Effects of Free Trade on Managers
North American Free Trade Agreement
(NAFTA)
Abolishes 99% of tariffs on goods traded between
Mexico, Canada and the United States
Unrestricted cross-border flows of resources
Increased investment by U.S. firms in Mexican
manufacturing facilities due lower wage costs in Mexico
Opportunities and Threats
The opportunity to serve more markets
Increased competition from NAFTA competitors
6-30
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The Role of National Culture
The Role of National Culture
Values
Ideas about what a society believes to be
good, desirable and beautiful.
Provides conceptual support for democracy,
truth, appropriate roles for men, and women.
Usually not static but
very slow to change.
6-31
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The Role of National Culture
The Role of National Culture
Norms
Unwritten rules and codes of conduct that
prescribe how people should act in particular
situations.
Folkwaysroutine social conventions of daily life (e.g.,
dress codes and social manners)
Moresbehavioral norms that are considered central to
functioning of society and much more significant than
folkways (e.g., theft and adultery), and they are often
enacted into law.
Norms vary from country to country.
6-32
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Hofstedes Model of National Culture
Hofstedes Model of National Culture
Figure 6.4
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Hofstedes Model of National
Culture
Hofstedes Model of National
Culture
Individualism
A worldview that values individual freedom and
self-expression and holds a strong belief in
personal rights and the need for persons to be
judged by their achievements rather their social
background.
Collectivism
A worldview that values subordination of the
individual to the goals of the group.
Widespread under communism and prevalent in
J apan as well.
6-34
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Hofstedes Model of National
Culture
Hofstedes Model of National
Culture
Power Distance
A societys acceptance of differences in the
well being of citizens due to differences in
heritage, and physical and intellectual
capabilities (individualism).
In high power distance societies, the gap between
rich and poor becomes very wide (e.g., Panama and
Malaysia).
In the low power distance societies of western
cultures (e.g., United States and Germany), the gap
between rich and poor is reduced by taxation and
welfare programs.
6-35
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Hofstedes Model of National
Culture
Hofstedes Model of National
Culture
Achievement versus Nurturing Orientation
Achievement-oriented societies value
assertiveness, performance, and success and
are results-oriented.
Nurturing-oriented cultures value quality of
life, personal relationships, and service.
The United States and J apan are
achievement-oriented; Sweden and Denmark
are more nurturing-oriented.
6-36
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Hofstedes Model of National
Culture
Hofstedes Model of National
Culture
Uncertainty Avoidance
Societies and people differ in their tolerance for
uncertainty and risk.
Low uncertainty avoidance cultures (e.g., U.S. and
Hong Kong) value diversity and tolerate a wide
range of opinions and beliefs.
High uncertainty avoidance societies (e.g., J apan
and France) are more rigid and expect high
conformity in their citizens beliefs and norms of
behavior.
6-37
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Hofstedes Model of National
Culture
Hofstedes Model of National
Culture
Long Term Outlook
Cultures (e.g., Taiwan and Hong Kong)
with a long-term in outlook are based on
the values of saving, and persistence.
Short-term outlook societies (e.g., France
and the United States) seek the
maintenance of personal stability or
happiness in the present.
6-38
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
National Culture and Global
Management
National Culture and Global
Management
Management practices that are effective
in one culture often will not work as well
in another culture
Managers must be sensitive to the
value systems and norms
of an individuals country
and behave accordingly
6-39
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Movie Example: Antitrust
Movie Example: Antitrust
How does the pressure to
complete and deliver Synapse, a
new technology, change the way
that Gary Winston manages
N.U.R.V.?